By
Michaela Whitbourn, Kate McClymont, Sean Nicholls

April 28, 2014, 5:36 p.m.

Former state energy minister Chris Hartcher and other Liberal MPs corruptly solicited hundreds of thousands of dollars in illegal political donations and used a law firm to launder some of the cash, an explosive corruption inquiry has heard.

Premier Mike Baird has ordered an urgent audit of hundreds of thousands of dollars in political donations made to the NSW Liberal party before the last state election, declaring he is "shocked and appalled" at evidence of illegal payments aired at a corruption inquiry.

On Monday, the Independent Commission Against Corruption heard a "substantial" portion of $700,000 donated to the NSW Liberals before the March 2011 election came from illegal sources, including property developers who have been banned from donating in NSW since December 2009.

"I am shocked and appalled at the allegations raised in today’s opening statement at ICAC," Mr Baird said in a statement.

"As I said at the announcement of this inquiry, if any wrongdoing is found, the book should, and will, be thrown at the perpetrators."

The Premier said while it would be "irresponsible" to provide a "running commentary" while the matter was still before the ICAC, he confirmed upper house MP Marie Ficarra had withdrawn from the parliamentary Liberal party.

The ICAC inquiry has heard that Ms Ficarra solicited an illegal $5,000 donation from property developer Tony Merhi. The announcement means she will sit as in independent in the Parliament.

Mr Baird also revealed Liberal party fund-raiser and hotels lobbyist Paul Nicolaou had resigned as chairman of the party's chief fund-raising body, the Millennium Forum. Mr Nicolaou has also gone on indefinite "personal leave" from his day job as chief executive of the NSW branch of the Australian Hotels Association.

The ICAC has heard that Mr Nicolaou was complicit in a scheme to disguise illegal donations to the NSW Liberals via another entity, the Free Enterprise Foundation.

Mr Baird said he had told newly appointed NSW Liberal state director Tony Nutt to "investigate the allegations made at ICAC and respond to them promptly – including by dealing with any payments that have been made to the party in contravention of the law".

"I want to assure the people of NSW that, as Premier, I intend to overhaul the political culture of NSW so that the wrongdoings that have been uncovered in a series of recent ICAC investigations will never happen again," Mr Baird said.

Earlier, NSW Energy Minister Anthony Roberts defended his failure to declare a holiday he took on a yacht owned by a prominent property developer in 2007, after receiving advice he was not required to advise the Parliament of the holiday.

The Independent Commission Against Corruption heard on Monday that Mr Roberts had holidayed with former energy minister Chris Hartcher on the Octavia, a yacht owned by late shopping centre developer Nabil Gazal.

Members of the Gazal family have been revealed as donors to a Liberal party slush fund established before the 2011 election to benefit Central Coast candidates - when donations from property developers were prohibited in NSW.

The inquiry heard on Monday that Mr Hartcher and other Liberal MPs corruptly solicited more than $400,000 in illegal political donations and Mr Hartcher used a law firm to launder some of the cash.

Mr Roberts did not disclose the 2007 trip on the yacht in his parliamentary register of interests.

But in a statement issued on Monday afternoon, he said he had received advice from the Clerk of the Legislative Assembly that he was not required to do so at the time.

"I paid my own airfares and costs associated with my attendance," he said. "For these reasons, I understood at the time that I did not need to make a disclosure on my pecuniary interests register.

"This has been confirmed as I have today been advised by the Clerk of the NSW Legislative Assembly that she does not believe that at that time there was a requirement to make a disclosure about such a private trip.

"I held no shadow portfolio responsibilities at the time. I was the Member for Lane Cove and attended in my personal capacity."

Ms Ficarra has stood aside from her position as parliamentary secretary to the Premier as well as from the parliamentary Liberal Party until the ICAC inquiry into abuse of electoral funding laws is completed.

Counsel assisting the inquiry, Geoffrey Watson, SC, said investigators had uncovered evidence of the "systematic subversion of the electoral funding laws of NSW".

He said Ms Ficarra, who was also parliamentary secretary to then premier Barry O'Farrell, was part of the scheme and had solicited a $5000 donation from property developer Tony Merhi just days before the March 2011 state election. The inquiry heard her explanations about the donation were not credible.

Ms Ficarra "denies the allegations completely", said a spokesman from her office. "We have evidence which we can present which shows she is innocent. Her version of events is truthful and she has acted in good faith at all times," he said.

Since 2009, developers have been prohibited from donating to political parties.

Mr Baird immediately asked Ms Ficarra to step aside from her duties as a parliamentary secretary.

In his address to the ICAC on Monday morning, Mr Watson said some donations under scrutiny were "merely an attempt to buy access to politicians, and the size of their donation is no more than [the donor's] best guess at the price to purchase a politician's attention".

The money was channelled into Eightbyfive, an alleged slush fund set up by Mr Hartcher's former adviser Tim Koelma, which was allegedly used to pay salaries to prospective central coast MPs Chris Spence and Darren Webber.

Gazcorp, the proponent of the controversial Orange Grove shopping centre development in Liverpool, paid $137,000 to the fund, while the Obeid-linked infrastructure company Australian Water Holdings paid $183,000.

Orange Grove was given the green light after the Liberal Party won the state election.

The inquiry heard that Mr Hartcher was close to Gazcorp directors Nabil and Nicholas Gazal, the sons of the late Sydney businessman Nabil Gazal.

The inquiry heard that in 2007, Mr Roberts also sailed the Whitsundays with Mr Hartcher and the Gazals.

Mr Roberts took over as energy minister after Mr Hartcher resigned following an ICAC raid of his office last year.

Mr Watson said Mr Hartcher "repeatedly granted favours" to Australian Water Holdings and Buildev, which is controlled by Mr Tinkler.

The inquiry heard Police Minister Mike Gallacher was on "first-name terms" with Mr Tinkler's associate Ray Williams and Mr Williams texted Mr Gallacher in March 2011 to set up a "lunch or dinner".

Mr Koelma is alleged to have run what he described as a "black ops" mission to destroy the head of Sydney Water, Kerry Schott, who was standing in the way of a lucrative public-private partnership for Australian Water Holdings.

This allegedly involved making false allegations to ICAC about Dr Schott.

One of the nation's largest developers, Harry Triguboff from Meriton, is alleged to have hidden his donations to the Liberal Party via the Free Enterprise Foundation.

Mr Watson said the use of the foundation in this way was "a serious breach of the law, and a serious breach of trust with the voters of NSW".

Chief Liberal fund-raiser Paul Nicolaou has agreed in private evidence that the foundation was used to hide money from prohibited donors.

It is also alleged that Mr Nicolaou, on the letterhead of the Liberal Party's fund-raising arm the Millennium Forum, urged 2GB broadcaster Alan Jones to use his radio program to destroy Dr Schott's career.

Delivering the opening address in Operation Spicer, the Independent Commission Against Corruption's inquiry into political fund-raising in the NSW Liberal Party, Mr Watson said the inquiry would show that "a group of persons have engaged in sophisticated, well organised and systematic subversion of the electoral funding laws".

Mr Hartcher allegedly used a law firm, Hartcher Reid, and his own nephew to launder $4000 in donations, dragging them "unwittingly into an illicit enterprise".